A slide in commodity prices and softer demand from China and Australia has led to lower export receipts in April 2012. The latest official trade figures signal weakness in the external sector, with the trade surplus for the month falling to $355 million.
On an annualised basis the trade balance has moved into deficit. For the 12 months to April 2012, the trade deficit was $541 million; a sharp deterioration compared to the $1.2 billion surplus recorded in the year to April 2011.
Exports decreased to $3.9 billion in April 2012 from $4.21 billion in March 2012, falling 17% from April 2011's record high of $4.7 billion. Driving the decrease in exports was weaker commodity prices. Exports of dairy products, meat and edible offal, crude oil, and logs, wood and wood articles all showed lower receipts in the last month. Exports of milk powder, butter and cheese fell by 25% last month. Meat and edible offal fell 26%, while crude oil was down 51%. Casein and caseinates recorded the largest offsetting increase, up 36%.
The decline in the value of exports is a result of agricultural commodity prices trending downwards. Over the past 12 months, dairy prices in Fonterra's auction have dropped 41% from the March 2011 peak. There is also weakness in meat, aluminum, and wool prices.
Falling commodity prices were not the only culprit to lower export values. Demand from the country’s key markets also weakened. Monthly exports to Australia, the nation's biggest export partner, once again showed a decline, falling 13%, led by crude oil. New Zealand's second biggest export market, China, recorded a decrease of 11%. Exports to Japan fell 20% on a variety of commodities, including logs, wood and wood articles.
Import spending was also down. Imports in April were $3.5 billion, down 12% from March and almost flat compared to a year earlier. Keeping annualized imports within the positive mark were capital goods (up 7.1%) and crude oil imports (up 30.7%). For the 12 months to April, consumer imports were up only modestly (up 1.5%).
If commodity prices continue to slip in the coming months, and our trade performance continues to deteriorate, the burden on New Zealand’s struggling economy will only get heavier. This will throw further doubt on the government’s ability to reach its 2015 budget surplus goal, which is already looking fairly precarious.